Paralegals take on a lot of responsibility in their day to day work by handling important legal documents. Mishandling these documents can put their clients at a high risk of liability. A paralegal surety bond is a type of surety bond required by the state government. This surety bond ensures that the principal will abide by the rules and regulations of the governing body in order to protect clients from fraud, dishonesty, misstatement, misrepresentation, deceit and or any unlawful acts or omissions by the paralegal. It’s also common to refer to this type of surety bond as a legal document assistant bond.
Keep reading for more insight into what a paralegal surety bond is and how this type of bond works.
The point of a paralegal bond is to ensure that paralegals (also known as legal document assistants) follow all laws and regulations while rendering their services. They also have to operate within their own licensed abilities and limitations. A paralegal bond can also help protect clients from potential losses caused by paralegals.
Like with any type of surety bond, there are three parties involved in a paralegal bond:
Surety. The company that issues the surety bond and handles the claims process—including investigating the claims.
Principal. With a paralegal bond, the principal (aka the party who needs the bond) is the paralegal.
Obligee. Typically, the obligee of a paralegal bond is a state government.
If someone does file a claim against a paralegal bond then the surety has to investigate the claim. If they find the claim to be valid, they’ll initially pay out the claim, but the principal will have to pay them back and may even have to pay additional fees and interest.
Rules and regulations for paralegals vary by state, but in some states having a paralegal bond is necessary for anyone who prepares and files legal documents on behalf of a client. It’s also commonly required for anyone who provides legal assistance to have a paralegal bond. There are usually other requirements people must fulfill to work as a paralegal, but having a paralegal bond can be one of the more important requirements.
There are a few terms that are helpful to know in order to better understand how paralegal bond pricing works
Bonding capacity. The bonding capacity represents the highest dollar amount that someone can pursue when they file a claim against a surety bond.
Bond term. How long the paralegal bond is active for is referred to as the bond term.
Bond premium. How much you will spend in order to obtain a paralegal bond is known as the bond premium.
So, how much does a paralegal bond cost? Well that depends on a few factors, but the primary factor that influences paralegal bond pricing is the bonding capacity. The required bonding capacity varies by state. For example, in both California and Nevada, the bonding capacity is $25,000, but it can be a different amount in other states.
Usually, the bond premium (aka how much you’ll spend on a paralegal bond) is a certain percentage of the bonding capacity. The lower that percentage is, the less you’ll pay. The percentage you’re offered depends on your professional and financial history.
The following factors are all taken into account when determining the percentage you’ll pay:
Personal credit score
Business credit score
Years in business
The main influencing factor that determines what percentage you’ll be offered is your personal credit score. The higher your personal credit score is, the lower a percentage you’ll be offered when it comes time to determine what your bond premium will be. If you have time, before you apply for a paralegal bond, it’s a good idea to work on improving your personal credit score. Even if you can’t improve your personal credit score before applying, you can work on improving it throughout the entirety of the bond term. That way, when you go to renew your paralegal bond, you can potentially qualify for a better rate. If you have a good credit score, you can expect to pay 1% to 5% of the bond amount as your bond premium.
To improve your personal credit score, consider taking these steps:
Pay off credit card debt and other revolving credit card balances
Keep your credit utilization ratio low
Keep older credit accounts open to keep your length of credit history long
Check your credit report for any errors you can dispute
Pay all of your bills on time each month
Have a healthy mix of different credit products
Improving your personal credit score will benefit you in all areas of your life, including when it comes time to apply for or renew a paralegal bond.